##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Quarterly Period Ended September 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the Transition Period From  To
 Commission
File Number: 000-30421
 HANMI FINANCIAL CORPORATION
 (Exact Name of Registrant as Specified in its Charter)
 Delaware
    
    95-4788120(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 3660 Wilshire Boulevard, Penthouse Suite ALos Angeles, California
    
    90010(Address of Principal Executive Offices)
    
    (Zip Code)
 (213) 382-2200  
 (Registrants Telephone Number, Including Area Code)
 Not Applicable  
 (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
  þ o
  þ o o
  o þ




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##### 



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  QUARTERLY REPORT ON FORM 10-Q  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSConsolidated Statements of Financial Condition (Unaudited)
    
    
    1Consolidated Statements of Income (Unaudited)
    
    
    2Consolidated Statements of Changes in Shareholders Equity and Comprehensive Income (Unaudited)
    
    
    3Consolidated Statements of Cash Flows (Unaudited)
    
    
    4Notes to Consolidated Financial Statements (Unaudited)
    
    
    5ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    36ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    37PART II  OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    37ITEM 1A.
    
    RISK FACTORS
    
    
    37ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    37ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    38ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    38ITEM 5.
    
    OTHER INFORMATION
    
    
    38ITEM 6.
    
    EXHIBITS
    
    
    38SIGNATURES
    
    
    39EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(UNAUDITED)  (Dollars in Thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCash and Due From Banks
    
    $
    103,789
    
    
    $
    97,501Federal Funds Sold
    
    
    
    
    
    
    41,000Cash and Cash Equivalents
    
    
    103,789
    
    
    
    138,501Term Federal Funds Sold
    
    
    
    
    
    
    5,000Securities Held to Maturity, at Amortized Cost (Fair Value: 2007  $947; 2006  $969)
    
    
    945
    
    
    
    967Securities Available for Sale, at Fair Value
    
    
    356,671
    
    
    
    390,612Loans Receivable, Net of Allowance for Loan Losses of $34,503 and $27,557 at September
30, 2007 and December 31, 2006, Respectively
    
    
    3,177,848
    
    
    
    2,813,520Loans Held for Sale, at the Lower of Cost or Fair Value
    
    
    7,520
    
    
    
    23,870Customers Liability on Acceptances
    
    
    5,357
    
    
    
    8,403Premises and Equipment, Net
    
    
    20,597
    
    
    
    20,075Accrued Interest Receivable
    
    
    17,619
    
    
    
    16,919Other Real Estate Owned
    
    
    287
    
    
    
    Deferred Income Taxes
    
    
    13,480
    
    
    
    13,064Servicing Asset
    
    
    4,328
    
    
    
    4,579Goodwill
    
    
    209,991
    
    
    
    207,646Other Intangible Assets
    
    
    7,457
    
    
    
    6,312Federal Reserve Bank Stock
    
    
    11,733
    
    
    
    11,733Federal Home Loan Bank Stock
    
    
    13,792
    
    
    
    13,189Bank-Owned Life Insurance
    
    
    24,285
    
    
    
    23,592Other Assets
    
    
    35,916
    
    
    
    27,261TOTAL ASSETS
    
    $
    4,011,615
    
    
    $
    3,725,243LIABILITIES AND SHAREHOLDERS EQUITYLIABILITIES:Deposits:Noninterest-Bearing
    
    $
    690,513
    
    
    $
    728,347Interest-Bearing:Savings
    
    
    94,150
    
    
    
    99,255Money Market Checking and NOW Accounts
    
    
    476,257
    
    
    
    438,267Time Deposits of $100,000 or More
    
    
    1,474,764
    
    
    
    1,383,358Other Time Deposits
    
    
    311,873
    
    
    
    295,488Total Deposits
    
    
    3,047,557
    
    
    
    2,944,715Accrued Interest Payable
    
    
    20,449
    
    
    
    22,582Acceptances Outstanding
    
    
    5,357
    
    
    
    8,403FHLB Advances and Other Borrowings
    
    
    361,344
    
    
    
    169,037Junior Subordinated Debentures
    
    
    82,406
    
    
    
    82,406Other Liabilities
    
    
    11,593
    
    
    
    10,983Total Liabilities
    
    
    3,528,706
    
    
    
    3,238,126SHAREHOLDERS EQUITY:Common Stock, $.001 Par Value; Authorized 200,000,000 Shares; Issued 50,474,441
Shares (46,986,341 Shares Outstanding) and 50,239,613 Shares (49,076,613 Shares
Outstanding) at September 30, 2007 and December 31, 2006, Respectively
    
    
    50
    
    
    
    50Additional Paid-In Capital
    
    
    347,076
    
    
    
    344,810Accumulated Other Comprehensive Loss  Unrealized Loss on Securities Available for
Sale, Interest-Only Strips and Interest Rate Swaps, Net of Income Taxes of ($629)
and ($1,450) at September 30, 2007 and December 31, 2006, Respectively
    
    
    (1,458
    )
    
    
    (3,200
    )Retained Earnings
    
    
    196,208
    
    
    
    165,498541,876
    
    
    
    507,158Less Treasury Stock, at Cost; 3,488,100 and 1,163,000 Shares at September 30, 2007 and
December 31, 2006, Respectively
    
    
    (58,967
    )
    
    
    (20,041
    )Total Shareholders Equity
    
    
    482,909
    
    
    
    487,117TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    4,011,615
    
    
    $
    3,725,243
  1




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)  (Dollars in Thousands, Except Per Share Data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006INTEREST INCOME:Interest and Fees on Loans
    
    $
    66,714
    
    
    $
    63,392
    
    
    $
    194,487
    
    
    $
    175,409Interest on Investments
    
    
    4,422
    
    
    
    4,836
    
    
    
    13,558
    
    
    
    14,948Interest on Federal Funds Sold
    
    
    61
    
    
    
    436
    
    
    
    963
    
    
    
    748Interest on Term Federal Funds Sold
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Total Interest Income
    
    
    71,197
    
    
    
    68,664
    
    
    
    209,013
    
    
    
    191,105INTEREST EXPENSE:Interest on Deposits
    
    
    27,882
    
    
    
    25,178
    
    
    
    80,654
    
    
    
    66,690Interest on FHLB Advances and Other Borrowings
    
    
    3,785
    
    
    
    2,084
    
    
    
    8,875
    
    
    
    4,699Interest on Junior Subordinated Debentures
    
    
    1,675
    
    
    
    1,672
    
    
    
    4,974
    
    
    
    4,734Total Interest Expense
    
    
    33,342
    
    
    
    28,934
    
    
    
    94,503
    
    
    
    76,123NET INTEREST INCOME BEFORE PROVISION FOR CREDIT LOSSES
    
    
    37,855
    
    
    
    39,730
    
    
    
    114,510
    
    
    
    114,982Provision for Credit Losses
    
    
    8,464
    
    
    
    1,682
    
    
    
    17,619
    
    
    
    5,542NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
    
    
    29,391
    
    
    
    38,048
    
    
    
    96,891
    
    
    
    109,440NON-INTEREST INCOME:Service Charges on Deposit Accounts
    
    
    4,463
    
    
    
    4,249
    
    
    
    13,389
    
    
    
    12,663Insurance Commissions
    
    
    1,131
    
    
    
    250
    
    
    
    3,535
    
    
    
    646Trade Finance Fees
    
    
    1,082
    
    
    
    1,227
    
    
    
    3,549
    
    
    
    3,414Remittance Fees
    
    
    512
    
    
    
    517
    
    
    
    1,503
    
    
    
    1,537Other Service Charges and Fees
    
    
    691
    
    
    
    591
    
    
    
    1,881
    
    
    
    1,739Bank-Owned Life Insurance Income
    
    
    234
    
    
    
    221
    
    
    
    693
    
    
    
    654Increase in Fair Value of Derivatives
    
    
    207
    
    
    
    389
    
    
    
    521
    
    
    
    723Other Income
    
    
    457
    
    
    
    328
    
    
    
    1,223
    
    
    
    911Gain on Sales of Loans
    
    
    523
    
    
    
    1,400
    
    
    
    3,685
    
    
    
    3,550Gain on Sales of Other Real Estate Owned
    
    
    226
    
    
    
    
    
    
    
    226
    
    
    
    48Total Non-Interest Income
    
    
    9,526
    
    
    
    9,172
    
    
    
    30,205
    
    
    
    25,885NON-INTEREST EXPENSES:Salaries and Employee Benefits
    
    
    11,418
    
    
    
    10,357
    
    
    
    33,961
    
    
    
    30,209Occupancy and Equipment
    
    
    2,657
    
    
    
    2,482
    
    
    
    7,740
    
    
    
    7,122Data Processing
    
    
    1,540
    
    
    
    1,431
    
    
    
    4,768
    
    
    
    4,314Advertising and Promotion
    
    
    943
    
    
    
    665
    
    
    
    2,493
    
    
    
    2,122Supplies and Communication
    
    
    704
    
    
    
    636
    
    
    
    1,996
    
    
    
    1,848Professional Fees
    
    
    565
    
    
    
    390
    
    
    
    1,686
    
    
    
    1,550Amortization of Other Intangible Assets
    
    
    570
    
    
    
    585
    
    
    
    1,776
    
    
    
    1,815Decrease in Fair Value of Embedded Options
    
    
    37
    
    
    
    78
    
    
    
    233
    
    
    
    292Other Operating Expenses
    
    
    2,815
    
    
    
    3,237
    
    
    
    9,055
    
    
    
    8,126Total Non-Interest Expenses
    
    
    21,249
    
    
    
    19,861
    
    
    
    63,708
    
    
    
    57,398INCOME BEFORE PROVISION FOR INCOME TAXES
    
    
    17,668
    
    
    
    27,359
    
    
    
    63,388
    
    
    
    77,927Provision for Income Taxes
    
    
    6,580
    
    
    
    9,762
    
    
    
    23,922
    
    
    
    29,588NET INCOME
    
    $
    11,088
    
    
    $
    17,597
    
    
    $
    39,466
    
    
    $
    48,339EARNINGS PER SHARE:Basic
    
    $
    0.23
    
    
    $
    0.36
    
    
    $
    0.82
    
    
    $
    0.99Diluted
    
    $
    0.23
    
    
    $
    0.36
    
    
    $
    0.81
    
    
    $
    0.98WEIGHTED-AVERAGE SHARES OUTSTANDING:Basic
    
    
    47,355,143
    
    
    
    48,890,662
    
    
    
    48,232,464
    
    
    
    48,809,921Diluted
    
    
    47,536,078
    
    
    
    49,450,601
    
    
    
    48,569,863
    
    
    
    49,395,152DIVIDENDS DECLARED PER SHARE
    
    $
    0.06
    
    
    $
    0.06
    
    
    $
    0.18
    
    
    $
    0.18
  2




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME(UNAUDITED)  (Dollars in Thousands)
 Common Stock  Number of Shares
    
    Shareholders EquityAccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    Treasury
    
    
    TotalTreasury
    
    
    
    
    
    
    Common
    
    
    Paid-in
    
    
    Unearned
    
    
    Comprehensive
    
    
    Retained
    
    
    Stock,
    
    
    ShareholdersIssued
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    Compensation
    
    
    Loss
    
    
    Earnings
    
    
    at Cost
    
    
    EquityBALANCE  DECEMBER 31, 2005
    
    
    49,821,798
    
    
    
    (1,163,000
    )
    
    
    48,658,798
    
    
    $
    50
    
    
    $
    339,991
    
    
    $
    (1,150
    )
    
    $
    (4,383
    )
    
    $
    112,310
    
    
    $
    (20,041
    )
    
    $
    426,777Cumulative Adjustments:Tax Credit Funds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (656
    )
    
    
    
    
    
    
    (656
    )Share-Based Compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (916
    )
    
    
    1,150
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    234Exercises of Stock Options and Stock Warrants
    
    
    332,348
    
    
    
    
    
    
    
    332,348
    
    
    
    
    
    
    
    2,795
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,795Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    998Tax Benefit from Exercises of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    329Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,864
    )
    
    
    
    
    
    
    (8,864
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,339
    
    
    
    
    
    
    
    48,339Change in Unrealized Loss on Securities Available for Sale,
Interest-Only Strips and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    753
    
    
    
    
    
    
    
    
    
    
    
    753Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,092BALANCE  SEPTEMBER 30, 2006
    
    
    50,154,146
    
    
    
    (1,163,000
    )
    
    
    48,991,146
    
    
    $
    50
    
    
    $
    343,197
    
    
    $
    
    
    
    $
    (3,630
    )
    
    $
    151,129
    
    
    $
    (20,041
    )
    
    $
    470,705BALANCE  DECEMBER 31, 2006
    
    
    50,239,613
    
    
    
    (1,163,000
    )
    
    
    49,076,613
    
    
    $
    50
    
    
    $
    344,810
    
    
    $
    
    
    
    $
    (3,200
    )
    
    $
    165,498
    
    
    $
    (20,041
    )
    
    $
    487,117Shares Issued for Business Acquisitions
    
    
    102,181
    
    
    
    
    
    
    
    102,181
    
    
    
    
    
    
    
    2,198
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,198Exercises of Stock Options and Stock Warrants
    
    
    132,647
    
    
    
    
    
    
    
    132,647
    
    
    
    
    
    
    
    1,164
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,164Share-Based Compensation Expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,283
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,283Tax Benefit from Exercises of Stock Options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    173Cash Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,756
    )
    
    
    
    
    
    
    (8,756
    )Repurchase of Common Stock
    
    
    
    
    
    
    (2,325,100
    )
    
    
    (2,325,100
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (38,926
    )
    
    
    (38,926
    )Repurchase of Stock Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,552
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,552
    )Comprehensive Income:Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,466
    
    
    
    
    
    
    
    39,466Change in Unrealized Loss on Securities Available for Sale,
Interest-Only Strips and Interest Rate Swaps, Net of Tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,742
    
    
    
    
    
    
    
    
    
    
    
    1,742Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,208BALANCE  SEPTEMBER 30, 2007
    
    
    50,474,441
    
    
    
    (3,488,100
    )
    
    
    46,986,341
    
    
    $
    50
    
    
    $
    347,076
    
    
    $
    
    
    
    $
    (1,458
    )
    
    $
    196,208
    
    
    $
    (58,967
    )
    
    $
    482,909
  3




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)  (In Thousands)
 Nine Months EndedSeptember 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net Income
    
    $
    39,466
    
    
    $
    48,339Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:Depreciation and Amortization of Premises and Equipment
    
    
    2,186
    
    
    
    2,203Amortization of Premiums and Accretion of Discounts on Investments, Net
    
    
    150
    
    
    
    221Amortization of Other Intangible Assets
    
    
    1,776
    
    
    
    1,815Share-Based Compensation Expense
    
    
    1,283
    
    
    
    998Provision for Credit Losses
    
    
    17,619
    
    
    
    5,542Federal Home Loan Bank Stock Dividend
    
    
    (526
    )
    
    
    (460
    )Gain on Sales of Securities Available for Sale
    
    
    
    
    
    
    (2
    )Increase in Fair Value of Derivatives
    
    
    (521
    )
    
    
    (723
    )Decrease in Fair Value of Embedded Options
    
    
    233
    
    
    
    292Gain on Sales of Loans
    
    
    (3,685
    )
    
    
    (3,550
    )Gain on Sales of Other Real Estate Owned
    
    
    (226
    )
    
    
    (48
    )Loss on Sales of Premises and Equipment
    
    
    11
    
    
    
    22Excess Tax Benefit from Exercises of Stock Options
    
    
    (173
    )
    
    
    (329
    )Deferred Tax Benefit
    
    
    (2,400
    )
    
    
    (1,964
    )Origination of Loans Held for Sale
    
    
    (76,488
    )
    
    
    (88,047
    )Proceeds from Sales of Loans Held for Sale
    
    
    96,523
    
    
    
    85,327Increase in Accrued Interest Receivable
    
    
    (700
    )
    
    
    (2,070
    )Decrease (Increase) in Servicing Asset
    
    
    251
    
    
    
    (356
    )Increase in Cash Surrender Value of Bank-Owned Life Insurance
    
    
    (693
    )
    
    
    (655
    )Increase in Other Assets
    
    
    (9,718
    )
    
    
    (12,195
    )(Decrease) Increase in Accrued Interest Payable
    
    
    (2,133
    )
    
    
    7,280Increase in Other Liabilities
    
    
    199
    
    
    
    111Other, Net
    
    
    2,697
    
    
    
    3,159Net Cash Provided By Operating Activities
    
    
    65,131
    
    
    
    44,910CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from Redemption of Federal Reserve Bank Stock
    
    
    
    
    
    
    590Proceeds from Matured Term Federal Funds Sold
    
    
    5,000
    
    
    
    Proceeds from Matured or Called Securities Available for Sale
    
    
    45,762
    
    
    
    46,005Proceeds from Sales of Securities Available for Sale
    
    
    
    
    
    
    5,005Proceeds from Sales of Other Real Estate Owned
    
    
    1,306
    
    
    
    Net Increase in Loans Receivable
    
    
    (382,280
    )
    
    
    (352,062
    )Purchases of Federal Home Loan Bank Stock
    
    
    (77
    )
    
    
    (311
    )Purchases of Securities Available for Sale
    
    
    (11,158
    )
    
    
    (6,273
    )Purchases of Premises and Equipment
    
    
    (2,701
    )
    
    
    (1,763
    )Business Acquisitions, Net of Cash Acquired
    
    
    (4,121
    )
    
    
    Net Cash Used In Investing Activities
    
    
    (348,269
    )
    
    
    (308,809
    )CASH FLOWS FROM FINANCING ACTIVITIES:Increase in Deposits
    
    
    102,842
    
    
    
    147,667Proceeds from Exercises of Stock Options and Stock Warrants
    
    
    1,164
    
    
    
    2,795Tax Benefit from Exercises of Stock Options
    
    
    173
    
    
    
    329Stock Issued for Business Acquisitions
    
    
    2,198
    
    
    
    Cash Paid to Acquire Treasury Stock
    
    
    (38,926
    )
    
    
    Cash Paid to Acquire Stock Warrants
    
    
    (2,552
    )
    
    
    Cash Dividends Paid
    
    
    (8,756
    )
    
    
    (8,864
    )Proceeds from Long-Term FHLB Advances and Other Borrowings
    
    
    
    
    
    
    120,000Repayment of Long-Term FHLB Advances and Other Borrowings
    
    
    (330
    )
    
    
    (313
    )Net Change in Short-Term FHLB Advances and Other Borrowings
    
    
    192,613
    
    
    
    3,417Net Cash Provided By Financing Activities
    
    
    248,426
    
    
    
    265,031NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (34,712
    )
    
    
    1,132Cash and Cash Equivalents  Beginning of Period
    
    
    138,501
    
    
    
    163,477CASH AND CASH EQUIVALENTS END OF PERIOD
    
    $
    103,789
    
    
    $
    164,609Supplemental Disclosures of Cash Flow Information:Interest Paid
    
    $
    96,636
    
    
    $
    83,403Income Taxes Paid
    
    $
    33,784
    
    
    $
    30,708Transfers of Loans Receivable to Other Real Estate Owned
    
    $
    1,367
    
    
    $
    545
  4




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
 NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
     Note 1  Summary of
Significant Accounting Policies
  NOTE 2  SHARE-BASED COMPENSATION
 2007 Equity Compensation Plan
   5




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 2  SHARE-BASED COMPENSATION (Continued)
 Share-Based Compensation Expense
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2007
    
    2006
    
    2007
    
    2006(In Thousands)Share-Based Compensation Expense
    
    $
    416
    
    
    $
    424
    
    
    $
    1,283
    
    
    $
    998Related Tax Benefits
    
    $
    175
    
    
    $
    178
    
    
    $
    540
    
    
    $
    420
 Unrecognized Share-Based Compensation Expense
  Unrecognized
    
    
    AverageShare-Based
    
    
    ExpectedCompensation
    
    
    RecognitionExpense
    
    
    Period(Dollars in Thousands)Stock Option Awards:2007 Equity Compensation Plan
    
    $
    4,323
    
    
    3.1 years2004 CEO Stock Option Plan
    
    
    889
    
    
    3.3 yearsRestricted Stock Awards
    
    
    514
    
    
    1.4 yearsTotal Unrecognized Share-Based Compensation Expense
    
    $
    5,726
    
    
    3.0 years
 Share-Based Payment Award Activity  2007 Equity Compensation Plan
  Weighted-
    
    Weighted-
    
    AggregateAverage
    
    Average
    
    IntrinsicNumber
    
    Exercise
    
    Remaining
    
    Value ofof
    
    Price Per
    
    Contractual
    
    In-the-MoneyShares
    
    Share
    
    Life
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    1,497,478
    
    
    $
    15.44
    
    
    7.5 years
    
    $
    4,094
    (1)Options Granted
    
    
    72,000
    
    
    $
    16.06
    
    
    9.9 yearsOptions Exercised
    
    
    (37,512
    )
    
    $
    12.19
    
    
    4.7 yearsOptions Expired
    
    
    (14,000
    )
    
    $
    17.03
    
    
    8.0 yearsOptions Forfeited
    
    
    (33,200
    )
    
    $
    17.76
    
    
    8.2 yearsOptions Outstanding at End of Period
    
    
    1,484,766
    
    
    $
    15.49
    
    
    7.4 years
    
    $
    2,937
    (2)Options Exercisable at End of Period
    
    
    560,434
    
    
    $
    11.42
    
    
    5.6 years
    
    $
    2,627
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $17.06 as of June 29, 2007, over
the exercise price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $15.49 as of September 28, 2007,
over the exercise price, multiplied by the number of options.  6




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 2  SHARE-BASED COMPENSATION (Continued)
  Weighted-
    
    Weighted-
    
    AggregateAverage
    
    Average
    
    IntrinsicNumber
    
    Exercise
    
    Remaining
    
    Value ofof
    
    Price Per
    
    Contractual
    
    In-the-MoneyShares
    
    Share
    
    Life
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    1,755,813
    
    
    $
    15.31
    
    
    8.0 years
    
    $
    12,678
    (1)Options Granted
    
    
    102,667
    
    
    $
    16.64
    
    
    9.1 yearsOptions Exercised
    
    
    (130,647
    )
    
    $
    8.76
    
    
    4.4 yearsOptions Expired
    
    
    (14,000
    )
    
    $
    17.03
    
    
    8.0 yearsOptions Forfeited
    
    
    (229,067
    )
    
    $
    18.38
    
    
    8.3 yearsOptions Outstanding at End of Period
    
    
    1,484,766
    
    
    $
    15.49
    
    
    7.4 years
    
    $
    2,937
    (2)Options Exercisable at End of Period
    
    
    560,434
    
    
    $
    11.42
    
    
    5.6 years
    
    $
    2,627
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $22.53 as of December 29, 2006,
over the exercise price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $15.49 as of September 28, 2007,
over the exercise price, multiplied by the number of options.  Share-Based Payment Award Activity  2004 CEO Stock Option Plan
  AggregateIntrinsicNumber
    
    Exercise
    
    Remaining
    
    Value ofof
    
    Price Per
    
    Contractual
    
    In-the-MoneyShares
    
    Share
    
    Life
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.4 years
    
    $
    
    (1)Options Outstanding at End of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.3 years
    
    $
    
    (2)Options Exercisable at End of Period
    
    
    116,666
    
    
    $
    17.17
    
    
    7.3 years
    
    $
    
    (2)
 
 (2)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $17.06 as of June 29, 2007, over
the exercise price, multiplied by the number of options.(1)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $15.49 as of September 28, 2007,
over the exercise price, multiplied by the number of options. 7




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 2  SHARE-BASED COMPENSATION (Continued)
  AggregateIntrinsicNumber
    
    Exercise
    
    Remaining
    
    Value ofof
    
    Price Per
    
    Contractual
    
    In-the-MoneyShares
    
    Share
    
    Life
    
    Options(Dollars in Thousands, Except Per Share Data)Options Outstanding at Beginning of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.9 years
    
    $
    1,878
    (1)Options Outstanding at End of Period
    
    
    350,000
    
    
    $
    17.17
    
    
    7.3 years
    
    $
    
    (2)Options Exercisable at End of Period
    
    
    116,666
    
    
    $
    17.17
    
    
    7.3 years
    
    $
    
    (2)
 
 (1)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $22.53 as of December 29, 2006,
over the exercise price, multiplied by the number of options.(2)
    
    Intrinsic value represents the excess of the closing stock price on
the last trading day of the period, which was $15.49 as of September 28, 2007,
over the exercise price, multiplied by the number of options. Share-Based Payment Award Activity  Restricted Stock Awards
  Three Months Ended
    
    Nine Months EndedSeptember 30, 2007
    
    September 30, 2007Number
    
    Grant Date
    
    Number
    
    Grant Dateof
    
    Fair Value
    
    of
    
    Fair ValueShares
    
    Per Share
    
    Shares
    
    Per ShareNon-Vested at Beginning of Period
    
    
    40,000
    
    
    $
    18.15
    
    
    
    60,000
    
    
    $
    18.15Vested
    
    
    
    
    
    $
    18.15
    
    
    
    (20,000
    )
    
    $
    18.15Non-Vested at End of Period
    
    
    40,000
    
    
    $
    18.15
    
    
    
    40,000
    
    
    $
    18.15
 NOTE 3  EARNINGS PER SHARE
   8




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HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 3  EARNINGS PER SHARE (Continued)
  2007
    
    
    2006Weighted-
    
    
    
    
    
    
    
    
    
    
    Weighted-Average
    
    
    Per
    
    
    
    
    
    
    Average
    
    
    PerIncome
    
    
    Shares
    
    
    Share
    
    
    Income
    
    
    Shares
    
    
    Share(Numerator)
    
    
    (Denominator)
    
    
    Amount
    
    
    (Numerator)
    
    
    (Denominator)
    
    
    Amount(Dollars in Thousands, Except Per Share Data)Three Months Ended September 30:Basic EPS  Income Available to Common Shareholders
    
    $
    11,088
    
    
    
    47,355,143
    
    
    $
    0.23
    
    
    $
    17,597
    
    
    
    48,890,662
    
    
    $
    0.36Effect of Dilutive Securities  Options and Warrants
    
    
    
    
    
    
    180,935
    
    
    
    
    
    
    
    
    
    
    
    559,939
    
    
    
    Diluted EPS  Income Available to Common Shareholders
    
    $
    11,088
    
    
    
    47,536,078
    
    
    $
    0.23
    
    
    $
    17,597
    
    
    
    49,450,601
    
    
    $
    0.36Nine Months Ended September 30:Basic EPS  Income Available to Common Shareholders
    
    $
    39,466
    
    
    
    48,232,464
    
    
    $
    0.82
    
    
    $
    48,339
    
    
    
    48,809,921
    
    
    $
    0.99Effect of Dilutive Securities  Options and Warrants
    
    
    
    
    
    
    337,399
    
    
    
    (0.01
    )
    
    
    
    
    
    
    585,231
    
    
    
    (0.01
    )Diluted EPS  Income Available to Common Shareholders
    
    $
    39,466
    
    
    
    48,569,863
    
    
    $
    0.81
    
    
    $
    48,339
    
    
    
    49,395,152
    
    
    $
    0.98
  NOTE 4  INCOME TAXES
 Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109
   NOTE 5  SHAREHOLDERS EQUITY
 Stock Warrants
  9




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 5  SHAREHOLDERS EQUITY (Continued)
    Repurchase of Common Stock
  NOTE 6  OFF-BALANCE SHEET COMMITMENTS
   September 30,
    
    
    December 31,2007
    
    
    2006(In Thousands)Commitments to Extend Credit
    
    $
    551,009
    
    
    $
    578,347Commercial Letters of Credit
    
    
    50,583
    
    
    
    65,158Standby Letters of Credit
    
    
    46,559
    
    
    
    48,289Unused Credit Card Lines
    
    
    19,427
    
    
    
    17,031Total Undisbursed Loan Commitments
    
    $
    667,578
    
    
    $
    708,825
 10




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##### Table of Contents



HANMI FINANCIAL CORPORATION AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006 (Continued)
 NOTE 7  SEGMENT REPORTING
  11




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
  FORWARD-LOOKING STATEMENTS
 Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations Item 1A. Risk Factors, Item 7. Managements Discussion and Analysis
of Financial Condition and Results of Operations  Interest Rate Risk Management "
Liquidity and Capital Resources
 CRITICAL ACCOUNTING POLICIES
 Notes to Consolidated
Financial Statements Item 7.
Managements Discussion and Analysis of Financial Condition and Results of Operations  Critical
Accounting Policies
 12




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##### Table of Contents



SELECTED FINANCIAL DATA
  As of and for theThree Months EndedSeptember 30,2007
    
    2006(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    3,135,531
    
    
    $
    2,828,972Average Investment Securities
    
    $
    360,626
    
    
    $
    401,039Average Interest-Earning Assets
    
    $
    3,526,493
    
    
    $
    3,287,581Average Total Assets
    
    $
    3,915,517
    
    
    $
    3,675,091Average Deposits
    
    $
    3,016,118
    
    
    $
    2,927,956Average Borrowings
    
    $
    367,605
    
    
    $
    241,404Average Interest-Bearing Liabilities
    
    $
    2,683,930
    
    
    $
    2,427,883Average Shareholders Equity
    
    $
    487,006
    
    
    $
    463,011Average Tangible Equity (2)
    
    $
    269,255
    
    
    $
    248,147PER SHARE DATA:Earnings Per Share  Basic
    
    $
    0.23
    
    
    $
    0.36Earnings Per Share  Diluted
    
    $
    0.23
    
    
    $
    0.36Common Shares Outstanding at End of Period
    
    
    46,986,341
    
    
    
    48,991,146Book Value Per Share (3)
    
    $
    10.28
    
    
    $
    9.61Tangible Book Value Per Share (4)
    
    $
    5.65
    
    
    $
    5.23Cash Dividends Per Share
    
    $
    0.06
    
    
    $
    0.06SELECTED PERFORMANCE RATIOS:Return on Average Assets (5) (6)
    
    
    1.12
    %
    
    
    1.90
    %Return on Average Shareholders Equity (5) (7)
    
    
    9.03
    %
    
    
    15.08
    %Return on Average Tangible Equity (5) (8)
    
    
    16.34
    %
    
    
    28.13
    %Net Interest Spread (9)
    
    
    3.08
    %
    
    
    3.56
    %Net Interest Margin (10)
    
    
    4.26
    %
    
    
    4.79
    %Efficiency Ratio (11)
    
    
    44.85
    %
    
    
    40.61
    %Dividend Payout Ratio (12)
    
    
    25.43
    %
    
    
    16.70
    %Average Shareholders Equity to Average Total Assets
    
    
    12.44
    %
    
    
    12.60
    %SELECTED CAPITAL RATIOS:(13)Total Risk-Based Capital Ratio:Hanmi Financial Corporation
    
    
    10.86
    %
    
    
    12.02
    %Hanmi Bank
    
    
    10.74
    %
    
    
    12.00
    %Tier 1 Risk-Based Capital Ratio:Hanmi Financial Corporation
    
    
    9.83
    %
    
    
    11.03
    %Hanmi Bank
    
    
    9.70
    %
    
    
    11.01
    %Tier 1 Leverage Ratio:Hanmi Financial Corporation
    
    
    9.32
    %
    
    
    9.78
    %Hanmi Bank
    
    
    9.20
    %
    
    
    9.76
    %SELECTED ASSET QUALITY RATIOS:Non-Performing Loans to Total Gross Loans (14)
    
    
    1.39
    %
    
    
    0.47
    %Non-Performing Assets to Total Assets (15)
    
    
    1.12
    %
    
    
    0.36
    %Net Loan Charge-Offs to Average Total Gross Loans (16)
    
    
    0.77
    %
    
    
    0.09
    %Allowance for Loan Losses to Total Gross Loans
    
    
    1.07
    %
    
    
    0.99
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    77.19
    %
    
    
    209.82
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average shareholders equity. See Non-GAAP Financial
Measures.(3)
    
    Total shareholders equity divided by common shares outstanding.(4)
    
    Tangible equity divided by common shares outstanding. See Non-GAAP Financial
Measures.(5)
    
    Calculation based upon annualized net income.(6)
    
    Net income divided by average total assets.(7)
    
    Net income divided by average shareholders equity.(8)
    
    Net income divided by average tangible equity. See Non-GAAP Financial Measures.(9)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities.(10)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets.(11)
    
    Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income.(12)
    
    Cash dividends per share times common shares outstanding divided by net income.(13)
    
    The required ratios for a well-capitalized institution, as defined by regulations
of the Board of Governors of the Federal Reserve System, are 10 percent for Total Risk-Based
Capital Ratio (total capital divided by total risk-weighted assets); 6 percent for Tier 1
Risk-Based Capital Ratio (Tier 1 capital divided by total risk-weighted assets); and 5 percent
for Tier 1 Leverage Ratio (Tier 1 capital divided by average total assets).(14)
    
    Non-performing loans consist of non-accrual loans, loans past due 90 days or more
and restructured loans.(15)
    
    Non-performing assets consist of non-performing loans (see footnote (14) above) and
other real estate owned.(16)
    
    Calculation based upon annualized net loan charge-offs. 13




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##### Table of Contents



As of and for theNine Months EndedSeptember 30,2007
    
    2006(Dollars in Thousands, Except Per Share Data)AVERAGE BALANCES:Average Gross Loans, Net (1)
    
    $
    3,011,946
    
    
    $
    2,702,902Average Investment Securities
    
    $
    374,209
    
    
    $
    421,195Average Interest-Earning Assets
    
    $
    3,435,932
    
    
    $
    3,169,215Average Total Assets
    
    $
    3,825,784
    
    
    $
    3,557,227Average Deposits
    
    $
    2,976,676
    
    
    $
    2,857,260Average Borrowings
    
    $
    308,406
    
    
    $
    209,770Average Interest-Bearing Liabilities
    
    $
    2,575,061
    
    
    $
    2,329,135Average Shareholders Equity
    
    $
    494,731
    
    
    $
    450,069Average Tangible Equity (2)
    
    $
    276,627
    
    
    $
    233,671PER SHARE DATA:Earnings Per Share  Basic
    
    $
    0.82
    
    
    $
    0.99Earnings Per Share  Diluted
    
    $
    0.81
    
    
    $
    0.98Cash Dividends Per Share
    
    $
    0.18
    
    
    $
    0.18SELECTED PERFORMANCE RATIOS:Return on Average Assets (3) (4)
    
    
    1.38
    %
    
    
    1.82
    %Return on Average Shareholders Equity (3) (5)
    
    
    10.67
    %
    
    
    14.36
    %Return on Average Tangible Equity (3) (6)
    
    
    19.07
    %
    
    
    27.66
    %Net Interest Spread (7)
    
    
    3.22
    %
    
    
    3.69
    %Net Interest Margin (8)
    
    
    4.46
    %
    
    
    4.85
    %Efficiency Ratio (9)
    
    
    44.02
    %
    
    
    40.75
    %Dividend Payout Ratio (10)
    
    
    21.43
    %
    
    
    18.24
    %Average Shareholders Equity to Average Total Assets
    
    
    12.93
    %
    
    
    12.65
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs.(2)
    
    Average tangible equity is calculated by subtracting average goodwill and average
core deposit intangible assets from average shareholders equity. See Non-GAAP Financial
Measures.(3)
    
    Calculation based upon annualized net income.(4)
    
    Net income divided by average total assets.(5)
    
    Net income divided by average shareholders equity.(6)
    
    Net income divided by average tangible equity. See Non-GAAP Financial Measures.(7)
    
    Average yield earned on interest-earning assets less average rate paid on
interest-bearing liabilities.(8)
    
    Net interest income before provision for credit losses divided by average
interest-earning assets.(9)
    
    Total non-interest expenses divided by the sum of net interest income before
provision for credit losses and total non-interest income.(10)
    
    Cash dividends per share times common shares outstanding divided by net income. 14




---



##### Table of Contents



Non-GAAP Financial Measures
 Return on Average Tangible Equity
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(Dollars in Thousands)Average Shareholders Equity
    
    $
    487,006
    
    
    $
    463,011
    
    
    $
    494,731
    
    
    $
    450,069Less Average Goodwill and Average Other Intangible Assets
    
    
    (217,751
    )
    
    
    (214,864
    )
    
    
    (218,104
    )
    
    
    (216,398
    )Average Tangible Equity
    
    $
    269,255
    
    
    $
    248,147
    
    
    $
    276,627
    
    
    $
    233,671Return on Average Shareholders Equity
    
    
    9.03
    %
    
    
    15.08
    %
    
    
    10.67
    %
    
    
    14.36
    %Effect of Average Goodwill and Average Other Intangible Assets
    
    
    7.31
    %
    
    
    13.05
    %
    
    
    8.40
    %
    
    
    13.30
    %Return on Average Tangible Equity
    
    
    16.34
    %
    
    
    28.13
    %
    
    
    19.07
    %
    
    
    27.66
    %
 Tangible Book Value Per Share
   September 30,2007
    
    
    2006(Dollars in Thousands; ExceptPer Share Data)Total Shareholders Equity
    
    $
    482,909
    
    
    $
    470,705Less Goodwill and Other Intangible Assets
    
    
    (217,448
    )
    
    
    (214,522
    )Tangible Equity
    
    $
    265,461
    
    
    $
    256,183Book Value Per Share
    
    $
    10.28
    
    
    $
    9.61Effect of Goodwill and Other Intangible Assets
    
    
    (4.63
    )
    
    
    (4.38
    )Tangible Book Value Per Share
    
    $
    5.65
    
    
    $
    5.23
 15




---



##### Table of Contents



RESULTS OF OPERATIONS
 Overview
 Three Months Ended September 30, 2007 vs. 2006
        Nine Months Ended September 30, 2007 vs. 2006
  16




---



##### Table of Contents



Net Interest Income Before Provision for Credit Losses
  17




---



##### Table of Contents



Three Months Ended September 30, 2007 vs. 2006
  Three Months EndedSeptember 30, 2007
    
    
    September 30, 2006Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    3,135,531
    
    
    $
    66,714
    
    
    
    8.44
    %
    
    $
    2,828,972
    
    
    $
    63,392
    
    
    
    8.89
    %Municipal Securities (2)
    
    
    70,984
    
    
    
    764
    
    
    
    4.31
    %
    
    
    71,301
    
    
    
    770
    
    
    
    4.32
    %Obligations of Other U.S. Government Agencies
    
    
    119,704
    
    
    
    1,286
    
    
    
    4.30
    %
    
    
    118,365
    
    
    
    1,268
    
    
    
    4.29
    %Other Debt Securities
    
    
    169,938
    
    
    
    2,022
    
    
    
    4.76
    %
    
    
    211,373
    
    
    
    2,456
    
    
    
    4.65
    %Equity Securities
    
    
    25,431
    
    
    
    350
    
    
    
    5.51
    %
    
    
    24,720
    
    
    
    342
    
    
    
    5.53
    %Federal Funds Sold
    
    
    4,905
    
    
    
    61
    
    
    
    4.97
    %
    
    
    32,850
    
    
    
    436
    
    
    
    5.31
    %Total Interest-Earning Assets
    
    
    3,526,493
    
    
    
    71,197
    
    
    
    8.01
    %
    
    
    3,287,581
    
    
    
    68,664
    
    
    
    8.29
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    94,034
    
    
    
    
    
    
    
    
    
    
    
    93,300Allowance for Loan Losses
    
    
    (31,535
    )
    
    
    
    
    
    
    
    
    
    
    (27,417
    )Other Assets
    
    
    326,525
    
    
    
    
    
    
    
    
    
    
    
    321,627Total Noninterest-Earning Assets
    
    
    389,024
    
    
    
    
    
    
    
    
    
    
    
    387,510Total Assets
    
    $
    3,915,517
    
    
    
    
    
    
    
    
    
    
    $
    3,675,091LIABILITIES AND SHAREHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    95,147
    
    
    
    567
    
    
    
    2.36
    %
    
    $
    102,518
    
    
    
    440
    
    
    
    1.70
    %Money Market Checking and NOW Accounts
    
    
    471,756
    
    
    
    4,164
    
    
    
    3.50
    %
    
    
    441,880
    
    
    
    3,512
    
    
    
    3.15
    %Time Deposits of $100,000 or More
    
    
    1,438,711
    
    
    
    19,263
    
    
    
    5.31
    %
    
    
    1,358,908
    
    
    
    17,881
    
    
    
    5.22
    %Other Time Deposits
    
    
    310,711
    
    
    
    3,888
    
    
    
    4.96
    %
    
    
    283,173
    
    
    
    3,345
    
    
    
    4.69
    %FHLB Advances and Other Borrowings
    
    
    285,199
    
    
    
    3,785
    
    
    
    5.27
    %
    
    
    158,998
    
    
    
    2,084
    
    
    
    5.20
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    1,675
    
    
    
    8.06
    %
    
    
    82,406
    
    
    
    1,672
    
    
    
    8.05
    %Total Interest-Bearing Liabilities
    
    
    2,683,930
    
    
    
    33,342
    
    
    
    4.93
    %
    
    
    2,427,883
    
    
    
    28,934
    
    
    
    4.73
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    699,793
    
    
    
    
    
    
    
    
    
    
    
    741,477Other Liabilities
    
    
    44,788
    
    
    
    
    
    
    
    
    
    
    
    42,720Total Noninterest-Bearing Liabilities
    
    
    744,581
    
    
    
    
    
    
    
    
    
    
    
    784,197Total Liabilities
    
    
    3,428,511
    
    
    
    
    
    
    
    
    
    
    
    3,212,080Shareholders Equity
    
    
    487,006
    
    
    
    
    
    
    
    
    
    
    
    463,011Total Liabilities and Shareholders Equity
    
    $
    3,915,517
    
    
    
    
    
    
    
    
    
    
    $
    3,675,091Net Interest Income
    
    
    
    
    
    $
    37,855
    
    
    
    
    
    
    
    
    
    
    $
    39,730Net Interest Spread(3)
    
    
    
    
    
    
    
    
    
    
    3.08
    %
    
    
    
    
    
    
    
    
    
    
    3.56
    %Net Interest Margin(4)
    
    
    
    
    
    
    
    
    
    
    4.26
    %
    
    
    
    
    
    
    
    
    
    
    4.79
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs, but excluding the allowance
for loan losses. Non-accrual loans are included in the average loan balance. Loan fees have
been included in the calculation of interest income. Loan fees were $580,000 and $1.4 million
for the three months ended September 30, 2007 and 2006, respectively.(2)
    
    If computed on a tax-equivalent basis using an effective marginal rate of 35
percent, tax-exempt income would be $1.2 million and $1.2 million, and the yields would be
6.62 percent and 6.65 percent, for the three months ended September 30, 2007 and 2006,
respectively.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets. 18




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##### Table of Contents



Three Months EndedSeptember 30, 2007 vs. 2006Increase (Decrease) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest Income:Gross Loans, Net
    
    $
    6,632
    
    
    $
    (3,310
    )
    
    $
    3,322Municipal Securities
    
    
    (3
    )
    
    
    (3
    )
    
    
    (6
    )Obligations of Other U.S. Government Agencies
    
    
    14
    
    
    
    4
    
    
    
    18Other Debt Securities
    
    
    (492
    )
    
    
    58
    
    
    
    (434
    )Equity Securities
    
    
    10
    
    
    
    (2
    )
    
    
    8Federal Funds Sold
    
    
    (350
    )
    
    
    (25
    )
    
    
    (375
    )Total Interest Income
    
    
    5,811
    
    
    
    (3,278
    )
    
    
    2,533Interest Expense:Savings
    
    
    (34
    )
    
    
    161
    
    
    
    127Money Market Checking and NOW Accounts
    
    
    246
    
    
    
    406
    
    
    
    652Time Deposits of $100,000 or More
    
    
    1,064
    
    
    
    318
    
    
    
    1,382Other Time Deposits
    
    
    336
    
    
    
    207
    
    
    
    543FHLB Advances and Other Borrowings
    
    
    1,675
    
    
    
    26
    
    
    
    1,701Junior Subordinated Debentures
    
    
    
    
    
    
    3
    
    
    
    3Total Interest Expense
    
    
    3,287
    
    
    
    1,121
    
    
    
    4,408Change in Net Interest Income
    
    $
    2,524
    
    
    $
    (4,399
    )
    
    $
    (1,875
    )
     19




---



##### Table of Contents



Nine Months Ended September 30, 2007 vs. 2006
  Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006Interest
    
    
    Average
    
    
    
    
    
    
    Interest
    
    
    AverageAverage
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate(Dollars in Thousands)ASSETSInterest-Earning Assets:Gross Loans, Net (1)
    
    $
    3,011,946
    
    
    $
    194,487
    
    
    
    8.63
    %
    
    $
    2,702,902
    
    
    $
    175,409
    
    
    
    8.68
    %Municipal Securities (2)
    
    
    71,883
    
    
    
    2,290
    
    
    
    4.25
    %
    
    
    72,702
    
    
    
    2,321
    
    
    
    4.26
    %Obligations of Other U.S. Government Agencies
    
    
    118,894
    
    
    
    3,775
    
    
    
    4.23
    %
    
    
    123,986
    
    
    
    3,887
    
    
    
    4.18
    %Other Debt Securities
    
    
    183,432
    
    
    
    6,438
    
    
    
    4.68
    %
    
    
    224,507
    
    
    
    7,742
    
    
    
    4.60
    %Equity Securities
    
    
    25,244
    
    
    
    1,055
    
    
    
    5.57
    %
    
    
    24,619
    
    
    
    997
    
    
    
    5.40
    %Federal Funds Sold
    
    
    24,405
    
    
    
    963
    
    
    
    5.26
    %
    
    
    20,457
    
    
    
    748
    
    
    
    4.88
    %Term Federal Funds Sold
    
    
    128
    
    
    
    5
    
    
    
    5.21
    %
    
    
    
    
    
    
    
    
    
    
    Interest-Earning Deposits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    1
    
    
    
    3.17
    %Total Interest-Earning Assets
    
    
    3,435,932
    
    
    
    209,013
    
    
    
    8.13
    %
    
    
    3,169,215
    
    
    
    191,105
    
    
    
    8.06
    %Noninterest-Earning Assets:Cash and Cash Equivalents
    
    
    92,260
    
    
    
    
    
    
    
    
    
    
    
    94,221Allowance for Loan Losses
    
    
    (29,905
    )
    
    
    
    
    
    
    
    
    
    
    (26,361
    )Other Assets
    
    
    327,497
    
    
    
    
    
    
    
    
    
    
    
    320,152Total Noninterest-Earning Assets
    
    
    389,852
    
    
    
    
    
    
    
    
    
    
    
    388,012Total Assets
    
    $
    3,825,784
    
    
    
    
    
    
    
    
    
    
    $
    3,557,227LIABILITIES ANDSHAREHOLDERS EQUITYInterest-Bearing Liabilities:Deposits:Savings
    
    $
    98,440
    
    
    
    1,530
    
    
    
    2.08
    %
    
    $
    110,817
    
    
    
    1,402
    
    
    
    1.69
    %Money Market Checking and NOW Accounts
    
    
    444,173
    
    
    
    11,302
    
    
    
    3.40
    %
    
    
    481,564
    
    
    
    10,864
    
    
    
    3.02
    %Time Deposits of $100,000 or More
    
    
    1,418,825
    
    
    
    56,539
    
    
    
    5.33
    %
    
    
    1,250,467
    
    
    
    45,534
    
    
    
    4.87
    %Other Time Deposits
    
    
    305,217
    
    
    
    11,283
    
    
    
    4.94
    %
    
    
    276,517
    
    
    
    8,890
    
    
    
    4.30
    %FHLB Advances and Other Borrowings
    
    
    226,000
    
    
    
    8,875
    
    
    
    5.25
    %
    
    
    127,364
    
    
    
    4,699
    
    
    
    4.93
    %Junior Subordinated Debentures
    
    
    82,406
    
    
    
    4,974
    
    
    
    8.07
    %
    
    
    82,406
    
    
    
    4,734
    
    
    
    7.68
    %Total Interest-Bearing Liabilities
    
    
    2,575,061
    
    
    
    94,503
    
    
    
    4.91
    %
    
    
    2,329,135
    
    
    
    76,123
    
    
    
    4.37
    %Noninterest-Bearing Liabilities:Demand Deposits
    
    
    710,021
    
    
    
    
    
    
    
    
    
    
    
    737,895Other Liabilities
    
    
    45,971
    
    
    
    
    
    
    
    
    
    
    
    40,128Total Noninterest-Bearing Liabilities
    
    
    755,992
    
    
    
    
    
    
    
    
    
    
    
    778,023Total Liabilities
    
    
    3,331,053
    
    
    
    
    
    
    
    
    
    
    
    3,107,158Shareholders Equity
    
    
    494,731
    
    
    
    
    
    
    
    
    
    
    
    450,069Total Liabilities and Shareholders Equity
    
    $
    3,825,784
    
    
    
    
    
    
    
    
    
    
    $
    3,557,227Net Interest Income
    
    
    
    
    
    $
    114,510
    
    
    
    
    
    
    
    
    
    
    $
    114,982Net Interest Spread(3)
    
    
    
    
    
    
    
    
    
    
    3.22
    %
    
    
    
    
    
    
    
    
    
    
    3.69
    %Net Interest Margin(4)
    
    
    
    
    
    
    
    
    
    
    4.46
    %
    
    
    
    
    
    
    
    
    
    
    4.85
    %
 
 (1)
    
    Loans are net of deferred fees and related direct costs, but excluding the allowance
for loan losses. Non-accrual loans are included in the average loan balance. Loan fees have
been included in the calculation of interest income. Loan fees were $2.4 million and $4.0
million for the nine months ended September 30, 2007 and 2006, respectively.(2)
    
    If computed on a tax-equivalent basis using an effective marginal rate of 35
percent, tax-exempt income would be $3.5 million and $3.6 million, and the yields would be
6.53 percent and 6.55 percent, for the nine months ended September 30, 2007 and 2006,
respectively.(3)
    
    Represents the average rate earned on interest-earning assets less the average rate
paid on interest-bearing liabilities.(4)
    
    Represents annualized net interest income as a percentage of average
interest-earning assets. 20




---



##### Table of Contents



Nine Months EndedSeptember 30, 2007 vs. 2006Increase (Decrease) Due to Change inVolume
    
    
    Rate
    
    
    Total(In Thousands)Interest Income:Gross Loans, Net
    
    $
    19,961
    
    
    $
    (883
    )
    
    $
    19,078Municipal Securities
    
    
    (26
    )
    
    
    (5
    )
    
    
    (31
    )Obligations of Other U.S. Government Agencies
    
    
    (160
    )
    
    
    48
    
    
    
    (112
    )Other Debt Securities
    
    
    (1,433
    )
    
    
    129
    
    
    
    (1,304
    )Equity Securities
    
    
    25
    
    
    
    33
    
    
    
    58Federal Funds Sold
    
    
    151
    
    
    
    64
    
    
    
    215Term Federal Funds Sold
    
    
    5
    
    
    
    
    
    
    
    5Interest-Earning Deposits
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )Total Interest Income
    
    
    18,522
    
    
    
    (614
    )
    
    
    17,908Interest Expense:Savings
    
    
    (169
    )
    
    
    297
    
    
    
    128Money Market Checking and NOW Accounts
    
    
    (885
    )
    
    
    1,323
    
    
    
    438Time Deposits of $100,000 or More
    
    
    6,471
    
    
    
    4,534
    
    
    
    11,005Other Time Deposits
    
    
    979
    
    
    
    1,414
    
    
    
    2,393FHLB Advances and Other Borrowings
    
    
    3,855
    
    
    
    321
    
    
    
    4,176Junior Subordinated Debentures
    
    
    
    
    
    
    240
    
    
    
    240Total Interest Expense
    
    
    10,251
    
    
    
    8,129
    
    
    
    18,380Change in Net Interest Income
    
    $
    8,271
    
    
    $
    (8,743
    )
    
    $
    (472
    )
    21




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##### Table of Contents



Provision for Credit Losses
   Non-Interest Income
  Three Months Ended September 30, 2007 vs. 2006
  Three Months EndedSeptember 30,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    4,463
    
    
    $
    4,249
    
    
    $
    214
    
    
    
    5.0
    %Insurance Commissions
    
    
    1,131
    
    
    
    250
    
    
    
    881
    
    
    
    352.4
    %Trade Finance Fees
    
    
    1,082
    
    
    
    1,227
    
    
    
    (145
    )
    
    
    (11.8
    %)Remittance Fees
    
    
    512
    
    
    
    517
    
    
    
    (5
    )
    
    
    (1.0
    %)Other Service Charges and Fees
    
    
    691
    
    
    
    591
    
    
    
    100
    
    
    
    16.9
    %Bank-Owned Life Insurance Income
    
    
    234
    
    
    
    221
    
    
    
    13
    
    
    
    5.9
    %Increase in Fair Value of Derivatives
    
    
    207
    
    
    
    389
    
    
    
    (182
    )
    
    
    (46.8
    %)Other Income
    
    
    457
    
    
    
    328
    
    
    
    129
    
    
    
    39.3
    %Gain on Sales of Loans
    
    
    523
    
    
    
    1,400
    
    
    
    (877
    )
    
    
    (62.6
    %)Gain on Sales of Other Real Estate Owned
    
    
    226
    
    
    
    
    
    
    
    226
    
    
    
    Total Non-Interest Income
    
    $
    9,526
    
    
    $
    9,172
    
    
    $
    354
    
    
    
    3.9
    %
  22




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##### Table of Contents



Nine Months Ended September 30, 2007 vs. 2006
  Nine Months EndedSeptember 30,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Service Charges on Deposit Accounts
    
    $
    13,389
    
    
    $
    12,663
    
    
    $
    726
    
    
    
    5.7
    %Insurance Commissions
    
    
    3,535
    
    
    
    646
    
    
    
    2,889
    
    
    
    447.2
    %Trade Finance Fees
    
    
    3,549
    
    
    
    3,414
    
    
    
    135
    
    
    
    4.0
    %Remittance Fees
    
    
    1,503
    
    
    
    1,537
    
    
    
    (34
    )
    
    
    (2.2
    %)Other Service Charges and Fees
    
    
    1,881
    
    
    
    1,739
    
    
    
    142
    
    
    
    8.2
    %Bank-Owned Life Insurance Income
    
    
    693
    
    
    
    654
    
    
    
    39
    
    
    
    6.0
    %Increase in Fair Value of Derivatives
    
    
    521
    
    
    
    723
    
    
    
    (202
    )
    
    
    (27.9
    %)Other Income
    
    
    1,223
    
    
    
    911
    
    
    
    312
    
    
    
    34.2
    %Gain on Sales of Loans
    
    
    3,685
    
    
    
    3,550
    
    
    
    135
    
    
    
    3.8
    %Gain on Sales of Other Real Estate Owned
    
    
    226
    
    
    
    48
    
    
    
    178
    
    
    
    370.8
    %Total Non-Interest Income
    
    $
    30,205
    
    
    $
    25,885
    
    
    $
    4,320
    
    
    
    16.7
    %
     23




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##### Table of Contents



Non-Interest Expenses
 Three Months Ended September 30, 2007 vs. 2006
  Three Months EndedSeptember 30,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    11,418
    
    
    $
    10,357
    
    
    $
    1,061
    
    
    
    10.2
    %Occupancy and Equipment
    
    
    2,657
    
    
    
    2,482
    
    
    
    175
    
    
    
    7.1
    %Data Processing
    
    
    1,540
    
    
    
    1,431
    
    
    
    109
    
    
    
    7.6
    %Advertising and Promotion
    
    
    943
    
    
    
    665
    
    
    
    278
    
    
    
    41.8
    %Supplies and Communications
    
    
    704
    
    
    
    636
    
    
    
    68
    
    
    
    10.7
    %Professional Fees
    
    
    565
    
    
    
    390
    
    
    
    175
    
    
    
    44.9
    %Amortization of Other Intangible Assets
    
    
    570
    
    
    
    585
    
    
    
    (15
    )
    
    
    (2.6
    %)Decrease in Fair Value of Embedded Options
    
    
    37
    
    
    
    78
    
    
    
    (41
    )
    
    
    (52.6
    %)Other Operating Expenses
    
    
    2,815
    
    
    
    3,237
    
    
    
    (422
    )
    
    
    (13.0
    %)Total Non-Interest Expenses
    
    $
    21,249
    
    
    $
    19,861
    
    
    $
    1,388
    
    
    
    7.0
    %
    24




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##### Table of Contents



Nine Months Ended September 30, 2007 vs. 2006
  Nine Months EndedSeptember 30,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Salaries and Employee Benefits
    
    $
    33,961
    
    
    $
    30,209
    
    
    $
    3,752
    
    
    
    12.4
    %Occupancy and Equipment
    
    
    7,740
    
    
    
    7,122
    
    
    
    618
    
    
    
    8.7
    %Data Processing
    
    
    4,768
    
    
    
    4,314
    
    
    
    454
    
    
    
    10.5
    %Advertising and Promotion
    
    
    2,493
    
    
    
    2,122
    
    
    
    371
    
    
    
    17.5
    %Supplies and Communications
    
    
    1,996
    
    
    
    1,848
    
    
    
    148
    
    
    
    8.0
    %Professional Fees
    
    
    1,686
    
    
    
    1,550
    
    
    
    136
    
    
    
    8.8
    %Amortization of Other Intangible Assets
    
    
    1,776
    
    
    
    1,815
    
    
    
    (39
    )
    
    
    (2.1
    %)Decrease in Fair Value of Embedded Options
    
    
    233
    
    
    
    292
    
    
    
    (59
    )
    
    
    (20.2
    %)Other Operating Expenses
    
    
    9,055
    
    
    
    8,126
    
    
    
    929
    
    
    
    11.4
    %Total Non-Interest Expenses
    
    $
    63,708
    
    
    $
    57,398
    
    
    $
    6,310
    
    
    
    11.0
    %
     Provision for Income Taxes
  25




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##### Table of Contents



FINANCIAL CONDITION
 Summary of Changes in Balance Sheets  September 30, 2007 Compared to December 31, 2006
  Investment Portfolio
 Accounting for Certain Investments in Debt and Equity Securities.
  September 30, 2007
    
    
    December 31, 2006Unrealized
    
    
    
    
    
    
    
    
    
    
    UnrealizedAmortized
    
    
    Fair
    
    
    Gain
    
    
    Amortized
    
    
    Fair
    
    
    GainCost
    
    
    Value
    
    
    (Loss)
    
    
    Cost
    
    
    Value
    
    
    (Loss)(In Thousands)Held to Maturity:Municipal Bonds
    
    $
    694
    
    
    $
    694
    
    
    $
    
    
    
    $
    693
    
    
    $
    693
    
    
    $
    Mortgage-Backed Securities
    
    
    251
    
    
    
    253
    
    
    
    2
    
    
    
    274
    
    
    
    276
    
    
    
    2Total Held to Maturity
    
    $
    945
    
    
    $
    947
    
    
    $
    2
    
    
    $
    967
    
    
    $
    969
    
    
    $
    2Available for Sale:U.S. Government Agency Securities
    
    $
    119,856
    
    
    $
    119,570
    
    
    $
    (286
    )
    
    $
    119,768
    
    
    $
    118,244
    
    
    $
    (1,524
    )Mortgage-Backed Securities
    
    
    100,469
    
    
    
    98,915
    
    
    
    (1,554
    )
    
    
    123,614
    
    
    
    121,608
    
    
    
    (2,006
    )Municipal Bonds
    
    
    69,920
    
    
    
    71,405
    
    
    
    1,485
    
    
    
    69,966
    
    
    
    71,710
    
    
    
    1,744Collateralized Mortgage Obligations
    
    
    54,927
    
    
    
    54,164
    
    
    
    (763
    )
    
    
    67,605
    
    
    
    66,113
    
    
    
    (1,492
    )Corporate Bonds
    
    
    7,982
    
    
    
    7,887
    
    
    
    (95
    )
    
    
    8,090
    
    
    
    7,887
    
    
    
    (203
    )Other Securities
    
    
    4,999
    
    
    
    4,730
    
    
    
    (269
    )
    
    
    4,999
    
    
    
    5,050
    
    
    
    51Total Available for Sale
    
    $
    358,153
    
    
    $
    356,671
    
    
    $
    (1,482
    )
    
    $
    394,042
    
    
    $
    390,612
    
    
    $
    (3,430
    )
 26




---



##### Table of Contents



Available for Sale
    
    
    Held to MaturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value(In Thousands)Within One Year
    
    $
    86,952
    
    
    $
    86,430
    
    
    $
    
    
    
    $
    Over One Year Through Five Years
    
    
    48,298
    
    
    
    48,163
    
    
    
    
    
    
    
    Over Five Years Through Ten Years
    
    
    9,282
    
    
    
    9,430
    
    
    
    694
    
    
    
    694Over Ten Years
    
    
    58,225
    
    
    
    59,569
    
    
    
    
    
    
    
    202,757
    
    
    
    203,592
    
    
    
    694
    
    
    
    694Mortgage-Backed Securities
    
    
    100,469
    
    
    
    98,915
    
    
    
    251
    
    
    
    253Collateralized Mortgage Obligations
    
    
    54,927
    
    
    
    54,164
    
    
    
    
    
    
    
    155,396
    
    
    
    153,079
    
    
    
    251
    
    
    
    253$
    358,153
    
    
    $
    356,671
    
    
    $
    945
    
    
    $
    947
  Loan Portfolio
   September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Real Estate Loans:Commercial Property
    
    $
    779,724
    
    
    $
    757,428
    
    
    $
    22,296
    
    
    
    2.9
    %Construction
    
    
    232,782
    
    
    
    202,207
    
    
    
    30,575
    
    
    
    15.1
    %Residential Property (1)
    
    
    86,594
    
    
    
    81,758
    
    
    
    4,836
    
    
    
    5.9
    %Total Real Estate Loans
    
    
    1,099,100
    
    
    
    1,041,393
    
    
    
    57,707
    
    
    
    5.5
    %Commercial and Industrial Loans:Commercial Term Loans
    
    
    1,507,241
    
    
    
    1,202,612
    
    
    
    304,629
    
    
    
    25.3
    %Commercial Lines of Credit
    
    
    256,299
    
    
    
    225,630
    
    
    
    30,669
    
    
    
    13.6
    %SBA Loans (2)
    
    
    147,057
    
    
    
    171,631
    
    
    
    (24,574
    )
    
    
    (14.3
    %)International Loans
    
    
    122,412
    
    
    
    126,561
    
    
    
    (4,149
    )
    
    
    (3.3
    %)Total Commercial and Industrial Loans
    
    
    2,033,009
    
    
    
    1,726,434
    
    
    
    306,575
    
    
    
    17.8
    %Consumer Loans
    
    
    90,416
    
    
    
    100,121
    
    
    
    (9,705
    )
    
    
    (9.7
    %)Total Loans Gross
    
    
    3,222,525
    
    
    
    2,867,948
    
    
    
    354,577
    
    
    
    12.4
    %Deferred Loan Fees
    
    
    (2,654
    )
    
    
    (3,001
    )
    
    
    347
    
    
    
    (11.6
    %)Gross Loans, Net of Deferred Loan Fees
    
    
    3,219,871
    
    
    
    2,864,947
    
    
    
    354,924
    
    
    
    12.4
    %Allowance for Loan Losses
    
    
    (34,503
    )
    
    
    (27,557
    )
    
    
    (6,946
    )
    
    
    25.2
    %Net Loans Receivable
    
    $
    3,185,368
    
    
    $
    2,837,390
    
    
    $
    347,978
    
    
    
    12.3
    %
 
 (1)
    
    Includes mortgage loans held for sale, at the lower of cost or market, of $630,000
at December 31, 2006.(2)
    
    Includes SBA loans held for sale, at the lower of cost or market, of $7.5 million
and $23.2 million at September 30, 2007 and December 31, 2006, respectively. 27




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##### Table of Contents



Non-Performing Assets
    September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Non-Accrual Loans
    
    $
    44,497
    
    
    $
    14,213
    
    
    $
    30,284
    
    
    
    213.1
    %Loans 90 Days or More Past Due and Still Accruing
    
    
    199
    
    
    
    2
    
    
    
    197
    
    
    
    9,850.0
    %Total Non-Performing Loans
    
    
    44,696
    
    
    
    14,215
    
    
    
    30,481
    
    
    
    214.4
    %Other Real Estate Owned
    
    
    287
    
    
    
    
    
    
    
    287
    
    
    
    Total Non-Performing Assets
    
    $
    44,983
    
    
    $
    14,215
    
    
    $
    30,768
    
    
    
    216.4
    %
  28




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##### Table of Contents



Allowance for Loan Losses and Allowance for Off-Balance Sheet Items
      29




---



##### Table of Contents



As of and for the Three Months EndedSeptember 30,
    
    
    June 30,
    
    
    September 30,2007
    
    
    2007
    
    
    2006(Dollars in Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    32,190
    
    
    $
    31,527
    
    
    $
    27,250Actual Charge-Offs
    
    
    (6,215
    )
    
    
    (2,662
    )
    
    
    (1,239
    )Recoveries on Loans Previously Charged Off
    
    
    131
    
    
    
    144
    
    
    
    583Net Loan Charge-Offs
    
    
    (6,084
    )
    
    
    (2,518
    )
    
    
    (656
    )Provision Charged to Operating Expenses
    
    
    8,397
    
    
    
    3,181
    
    
    
    1,682Balance at End of Period
    
    $
    34,503
    
    
    $
    32,190
    
    
    $
    28,276Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    1,730
    
    
    $
    1,888
    
    
    $
    2,130Provision Charged to Operating Expenses
    
    
    67
    
    
    
    (158
    )
    
    
    Balance at End of Period
    
    $
    1,797
    
    
    $
    1,730
    
    
    $
    2,130Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    0.77
    %
    
    
    0.33
    %
    
    
    0.09
    %Net Loan Charge-Offs to Total Gross Loans at End of Period (1)
    
    
    0.75
    %
    
    
    0.33
    %
    
    
    0.09
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    1.10
    %
    
    
    1.07
    %
    
    
    1.00
    %Allowance for Loan Losses to Total Gross Loans at End of Period
    
    
    1.07
    %
    
    
    1.05
    %
    
    
    0.99
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    69.96
    %
    
    
    31.38
    %
    
    
    9.20
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    72.45
    %
    
    
    79.16
    %
    
    
    39.00
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    77.19
    %
    
    
    142.30
    %
    
    
    209.82
    %Balances:Average Total Gross Loans Outstanding During Period
    
    $
    3,137,477
    
    
    $
    3,017,012
    
    
    $
    2,832,624Total Gross Loans Outstanding at End of Period
    
    $
    3,222,525
    
    
    $
    3,058,053
    
    
    $
    2,853,714Non-Performing Loans at End of Period
    
    $
    44,696
    
    
    $
    22,621
    
    
    $
    13,476
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios. As of and for theNine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in Thousands)Allowance for Loan Losses:Balance at Beginning of Period
    
    $
    27,557
    
    
    $
    24,963Actual Charge-Offs
    
    
    (11,497
    )
    
    
    (3,619
    )Recoveries on Loans Previously Charged Off
    
    
    491
    
    
    
    1,390Net Loan Charge-Offs
    
    
    (11,006
    )
    
    
    (2,229
    )Provision Charged to Operating Expenses
    
    
    17,952
    
    
    
    5,542Balance at End of Period
    
    $
    34,503
    
    
    $
    28,276Allowance for Off-Balance Sheet Items:Balance at Beginning of Period
    
    $
    2,130
    
    
    $
    2,130Provision Charged to Operating Expenses
    
    
    (333
    )
    
    
    Balance at End of Period
    
    $
    1,797
    
    
    $
    2,130Ratios:Net Loan Charge-Offs to Average Total Gross Loans (1)
    
    
    0.49
    %
    
    
    0.11
    %Net Loan Charge-Offs to Total Gross Loans at End of Period (1)
    
    
    0.46
    %
    
    
    0.10
    %Allowance for Loan Losses to Average Total Gross Loans
    
    
    1.14
    %
    
    
    1.04
    %Allowance for Loan Losses to Total Gross Loans at End of Period
    
    
    1.07
    %
    
    
    0.99
    %Net Loan Charge-Offs to Allowance for Loan Losses (1)
    
    
    42.65
    %
    
    
    10.54
    %Net Loan Charge-Offs to Provision Charged to Operating Expenses
    
    
    61.31
    %
    
    
    40.22
    %Allowance for Loan Losses to Non-Performing Loans
    
    
    77.19
    %
    
    
    209.82
    %Balances:Average Total Gross Loans Outstanding During Period
    
    $
    3,014,164
    
    
    $
    2,706,686Total Gross Loans Outstanding at End of Period
    
    $
    3,222,525
    
    
    $
    2,853,714Non-Performing Loans at End of Period
    
    $
    44,696
    
    
    $
    13,476
 
 (1)
    
    Net loan charge-offs are annualized to calculate the ratios. 30




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##### Table of Contents




    
    reviewing the adversely graded, delinquent or otherwise questionable loans;
    
    generating an estimate of the loss potential in each such loan;
    
    adjusting a qualitative factor for industry, economic or other external factors; and
    
    evaluating the present status of each loan.
  Deposits
  September 30,
    
    
    December 31,
    
    
    Increase (Decrease)2007
    
    
    2006
    
    
    Amount
    
    
    Percentage(Dollars in Thousands)Deposits:Demand  Noninterest-Bearing
    
    $
    690,513
    
    
    $
    728,347
    
    
    $
    (37,834
    )
    
    
    (5.2
    %)Interest-Bearing:Savings
    
    
    94,150
    
    
    
    99,255
    
    
    
    (5,105
    )
    
    
    (5.1
    %)Money Market Checking and NOW Accounts
    
    
    476,257
    
    
    
    438,267
    
    
    
    37,990
    
    
    
    8.7
    %Time Deposits of $100,000 or More
    
    
    1,474,764
    
    
    
    1,383,358
    
    
    
    91,406
    
    
    
    6.6
    %Other Time Deposits
    
    
    311,873
    
    
    
    295,488
    
    
    
    16,385
    
    
    
    5.5
    %Total Deposits
    
    $
    3,047,557
    
    
    $
    2,944,715
    
    
    $
    102,842
    
    
    
    3.5
    %
  FHLB Advances and Other Borrowings
   31




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##### Table of Contents



INTEREST RATE RISK MANAGEMENT
   After Three
    
    
    After OneWithin
    
    
    Months
    
    
    Year But
    
    
    
    
    
    
    Non-Three
    
    
    But Within
    
    
    Within Five
    
    
    After Five
    
    
    Interest-Months
    
    
    One Year
    
    
    Years
    
    
    Years
    
    
    Sensitive
    
    
    Total(Dollars in Thousands)ASSETSCash and Due From Banks
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    103,789
    
    
    $
    103,789Securities:Fixed Rate
    
    
    31,227
    
    
    
    72,169
    
    
    
    116,274
    
    
    
    104,391
    
    
    
    
    
    
    
    324,061Floating Rate
    
    
    10,549
    
    
    
    428
    
    
    
    17,848
    
    
    
    4,730
    
    
    
    
    
    
    
    33,555Loans:Fixed Rate
    
    
    36,824
    
    
    
    70,405
    
    
    
    570,799
    
    
    
    554,059
    
    
    
    
    
    
    
    1,232,087Floating Rate
    
    
    1,732,460
    
    
    
    70,621
    
    
    
    139,146
    
    
    
    3,714
    
    
    
    
    
    
    
    1,945,941Non-Accrual
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,497
    
    
    
    44,497Deferred Loan Fees and Allowance
for Loan Losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,157
    )
    
    
    (37,157
    )FRB and FHLB Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,525
    
    
    
    
    
    
    
    25,525Other Assets
    
    
    
    
    
    
    24,285
    
    
    
    
    
    
    
    6,693
    
    
    
    308,339
    
    
    
    339,317Total Assets
    
    $
    1,811,060
    
    
    $
    237,908
    
    
    $
    844,067
    
    
    $
    699,112
    
    
    $
    419,468
    
    
    $
    4,011,615LIABILITIES AND
SHAREHOLDERS EQUITYLiabilities:Deposits:Demand Deposits
    
    $
    42,154
    
    
    $
    139,432
    
    
    $
    334,637
    
    
    $
    174,290
    
    
    $
    
    
    
    $
    690,513Savings
    
    
    11,625
    
    
    
    35,302
    
    
    
    38,146
    
    
    
    9,077
    
    
    
    
    
    
    
    94,150Money Market Checking and
NOW Accounts
    
    
    70,675
    
    
    
    135,692
    
    
    
    154,613
    
    
    
    115,277
    
    
    
    
    
    
    
    476,257Time Deposits:Fixed Rate
    
    
    951,959
    
    
    
    824,020
    
    
    
    10,489
    
    
    
    115
    
    
    
    
    
    
    
    1,786,583Floating Rate
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54FHLB Advances and Other Borrowings
    
    
    238,567
    
    
    
    105,000
    
    
    
    13,127
    
    
    
    4,650
    
    
    
    
    
    
    
    361,344Junior Subordinated Debentures
    
    
    82,406
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,406Other Liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,399
    
    
    
    37,399Shareholders Equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482,909
    
    
    
    482,909Total Liabilities and
Shareholders Equity
    
    $
    1,397,440
    
    
    $
    1,239,446
    
    
    $
    551,012
    
    
    $
    303,409
    
    
    $
    520,308
    
    
    $
    4,011,615Repricing Gap
    
    $
    413,620
    
    
    $
    (1,001,538
    )
    
    $
    293,055
    
    
    $
    395,703
    
    
    $
    (100,840
    )Cumulative Repricing Gap
    
    $
    413,620
    
    
    $
    (587,918
    )
    
    $
    (294,863
    )
    
    $
    100,840
    
    
    $
    Cumulative Repricing Gap as a
Percentage of Total Assets
    
    
    10.31
    %
    
    
    (14.66
    %)
    
    
    (7.35
    %)
    
    
    2.51
    %
    
    
    Cumulative Repricing Gap as a
Percentage of Interest-Earning Assets
    
    
    11.61
    %
    
    
    (16.51
    %)
    
    
    (8.28
    %)
    
    
    2.83
    %
    
    
    
 32




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##### Table of Contents



Less than Three Months
    
    Less Than Twelve MonthsSeptember 30,
    
    June 30,
    
    September 30,
    
    June 30,2007
    
    2007
    
    2007
    
    2007(Dollars in Thousands)Cumulative Repricing Gap
    
    $
    413,620
    
    
    $
    564,945
    
    
    $
    (587,918
    )
    
    $
    (284,364
    )Percentage of Total Assets
    
    
    10.31
    %
    
    
    14.59
    %
    
    
    (14.66
    %)
    
    
    (7.35
    %)Percentage of Interest-Earning Assets
    
    
    11.61
    %
    
    
    16.38
    %
    
    
    (16.51
    %)
    
    
    (8.24
    %)
   Rate Shock TablePercentage Changes
    
    Change in AmountChange in
    
    Net
    
    Economic
    
    Net
    
    EconomicInterest
    
    Interest
    
    Value of
    
    Interest
    
    Value ofRate
    
    Income
    
    Equity
    
    Income
    
    Equity(Dollars in Thousands)200%
    
    
    7.19
    %
    
    
    (16.92
    %)
    
    $
    10,955
    
    
    $
    (79,008
    )100%
    
    
    3.58
    %
    
    
    (8.79
    %)
    
    $
    5,462
    
    
    $
    (41,039
    )(100%)
    
    
    (3.62
    %)
    
    
    9.49
    %
    
    $
    (5,521
    )
    
    $
    44,305(200%)
    
    
    (7.30
    %)
    
    
    19.47
    %
    
    $
    (11,126
    )
    
    $
    90,931
 33




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
   September 30,
    
    December 31,Liquidity Ratios
    
    2007
    
    2006Core Deposits/Total Assets
    
    
    28.41
    %
    
    
    30.10
    %Short-Term Non-Core Funding/Total Assets
    
    
    52.83
    %
    
    
    46.01
    %Net Loans/Total Assets
    
    
    79.67
    %
    
    
    76.60
    %Investments/Deposits
    
    
    12.76
    %
    
    
    15.93
    %Loans and Investments/Deposits
    
    
    117.33
    %
    
    
    112.52
    %Off-Balance Sheet Items/Total Assets
    
    
    16.66
    %
    
    
    19.04
    %
   34




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##### Table of Contents



Minimum
    
    Minimum to BeRegulatory
    
    Categorized asActual
    
    Requirement
    
    Well CapitalizedAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    Ratio(Dollars in Thousands)Total Capital (to Risk-Weighted Assets):Hanmi Financial Corporation
    
    $
    381,417
    
    
    
    10.86
    %
    
    $
    280,845
    
    
    
    8.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    376,380
    
    
    
    10.74
    %
    
    $
    280,448
    
    
    
    8.00
    %
    
    $
    350,559
    
    
    
    10.00
    %Tier 1 Capital (to Risk-Weighted Assets):Hanmi Financial Corporation
    
    $
    345,118
    
    
    
    9.83
    %
    
    $
    140,422
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    340,081
    
    
    
    9.70
    %
    
    $
    140,224
    
    
    
    4.00
    %
    
    $
    210,336
    
    
    
    6.00
    %Tier 1 Capital (to Average Total Assets):Hanmi Financial Corporation
    
    $
    345,118
    
    
    
    9.32
    %
    
    $
    148,049
    
    
    
    4.00
    %
    
    
    N/A
    
    
    
    N/AHanmi Bank
    
    $
    340,081
    
    
    
    9.20
    %
    
    $
    147,896
    
    
    
    4.00
    %
    
    $
    184,870
    
    
    
    5.00
    %
 Dividends
  OFF-BALANCE SHEET ARRANGEMENTS
 Note 7  Off-Balance Sheet Commitments Item 1. Business  Small Business Administration
Guaranteed Loans Item 1. Business  Off-Balance Sheet Commitments
 CONTRACTUAL OBLIGATIONS
  35




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##### Table of Contents



RECENTLY ISSUED ACCOUNTING STANDARDS
 SFAS No. 159 The Fair Value Option for
Financial Assets and Financial Liabilities
 SFAS No. 157 Fair Value Measurements
 SFAS No. 156 Accounting for Servicing of
Financial Assets
 SFAS No. 155 Accounting for Certain Hybrid
Financial Instruments, an amendment of FASB Statements No. 133 and SFAS No. 140
 
    
    permits fair value remeasurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation;
    
    clarifies which interest-only strips and principal-only strips are not subject to SFAS
No. 133;
    
    establishes a requirement to evaluate interests in securitized financial assets to
identify interests that are freestanding derivatives or hybrid financial instruments that
contain an embedded derivative requiring bifurcation;
    
    clarifies that concentrations of credit risk in the form of subordinations are not
embedded derivatives; and
    
    amends SFAS No. 140 to eliminate the prohibition on a qualified special purpose entity
from holding a derivative financial instrument that pertains to a beneficial interest other
than another derivative financial instrument.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Interest Rate Risk Management  Liquidity and Capital Resources.
 36




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##### Table of Contents






ITEM 4. CONTROLS AND PROCEDURES








PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ISSUER PURCHASES OF EQUITY SECURITIES(d) Maximum Number(a) Total
    
    
    
    
    
    (c) Total Number of
    
    (or Approximate DollarNumber of
    
    (b) Average
    
    Shares (or Units)
    
    Value) of Shares (orShares
    
    Price Paid
    
    Purchased as Part of
    
    Units) that May Yet Be(or Units)
    
    per Share
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased
    
    (or Unit)
    
    Plans or Programs
    
    Plans or ProgramsRepurchases from
July 1, 2007 to
July 31, 2007
    
    
    70,000
    
    
    $
    14.64
    
    
    
    70,000
    
    
    $
    25,038,000Repurchases from
August 1, 2007 to
August 31, 2007
    
    
    894,400
    
    
    $
    14.90
    
    
    
    894,400
    
    
    $
    11,682,000Repurchases from
September 1, 2007 to
September 30, 2007
    
    
    39,700
    
    
    $
    15.29
    
    
    
    39,700
    
    
    $
    11,074,000Total
    
    
    1,004,100
    
    
    $
    14.90
    
    
    
    1,004,100
    
    
    $
    11,074,000
 37




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##### Table of Contents



ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Document31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and
Rule 15d-14(a) of the Securities Exchange Act, as amended32.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 38




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##### Table of Contents



SIGNATURES
  HANMI FINANCIAL CORPORATION
 Date: November 9, 2007
    By:
    /s/ Sung Won Sohn, Ph.D.Sung Won Sohn, Ph.D.President and Chief Executive Officer 39